General Motors is betting on driverless and electric vehicles that might make money far in the future over passenger cars that aren’t pumping out profits today.

When GM announced cuts on November 26 that will eliminate about 14,000 jobs and shutter five factories, the company also said its investments in electric and autonomous vehicles will double in the next two years. And after spending the past few years making its internal combustion engines more efficient, GM said, it will now give development priority to battery-electric platforms.

Like other automakers, GM faces two trends: a shift in consumer taste from passenger cars to trucks, SUVs and crossovers, and the beginning of a much bigger transformation that may someday make electric and autonomous vehicles ubiquitous and even upend the whole car-making business model.

“The two are not closely intertwined, but they are related,” Gartner Analyst Mike Ramsey told TU Automotive, via email. “GM is spending billions on EV and AV development and is also struggling with a raft of slow selling cars.”

“GM can’t afford to subsidize expensive efforts in these new areas that may not produce meaningful income for years while also subsidizing money-losing cars,” Ramsey added.

But it’s not clear when or how electric models, and especially autonomous vehicles, will pay off.

“It’s a bold, risky bet,” said Michelle Krebs, executive analyst at Autotrader. “They want to be first and have a leadership position, and with that comes a risk.”

EVs only make up about 2% of new-car sales in the US, Krebs said. For AVs, there isn’t even a clear business model yet. It’s likely that GM and others will try to monetize AVs mostly through services like ride-hailing, which might offer fatter profit margins but will also pit automakers against rich, powerful rivals such as Google, she said.

Yet other automakers are making similar moves. When Ford announced earlier this year it would discontinue most of its car models in a massive reorganization, the company left its Ford Autonomous Vehicles and Ford Smart Mobility LLC divisions alone.

While GM is phasing out several cars for bigger, more truck-like models, the Chevrolet Bolt, a subcompact hatchback, is largely the face of its futuristic efforts so far. The battery-electric vehicle got a 20% production increase this quarter, and Bolts with factory-added self-driving technology are roaming the streets of San Francisco as GM’s Cruise Automation division prepares for a commercial ride-hailing service next year.

In March, GM announced it would spend more than $100 million to upgrade its Orion and Brownstown plants in Michigan to commercially produce self-driving Bolts beginning next year. Meanwhile, the company says it’s developing a prototype of a future EV that will go 180 miles on a ten-minute charge. It’s likely to roll out a long line of electrics.

On Tuesday, after slamming the job-cut announcement, President Trump threatened on Twitter to try to eliminate the federal tax credit that has helped EVs like the Bolt compete with conventional vehicles on price.

Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland. Nothing being closed in Mexico & China. The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including….

That would only hurt the US by putting domestic manufacturers farther behind rivals in other countries, like Germany and China, where governments are backing EVs more strongly, said Doug Newcomb, a senior mobility analyst at Wards Intelligence.

It’s too early to see how the electric and autonomous car industries will develop, so there is some risk when GM pours resources into the new technologies, Newcomb said. On the other hand, they need to be in the game.

“The bigger risk is not making that bet,” he said.

Stephen Lawson is a freelance writer based in San Francisco. Follow him on Twitter @sdlawsonmedia.

Contact us

Feature Sites

Connect with us

This website uses cookies, including third party ones,
to allow for analysis of how people use our website in order to
improve your experience and our services.
By continuing to use our website, you agree to the use of such cookies. Click here for more information on our
Cookie Policy
and Privacy Policy.